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General Motors and Ford have put car dealers on notice and advised them to stop “ripping off” consumers by raising prices above the sticker value. Both companies threatened to withhold deliveries from dealerships.
According to Ford, around 10 percent of its dealers are charging too much over the manufacturers’ suggested retail price (MSRP). The CEO of Ford, Jim Farley, commented on the price hikes as he delivered Ford’s quarterly numbers on Feb. 21.
“We have very good knowledge of who they are,” said Farley.
General Motors also complained of car dealerships raising the MSRP and threatened to withhold vehicle deliveries if the practice didn’t stop. The company confirmed they warned the dealerships via letter on Jan. 18. Ford has also threatened to withhold deliveries from its factory to the dealerships.
A report from Edmunds found that 80 percent of automobile sales were above the MSRP in January, with some consumers paying as much as $10,000 over the MSRP. An analyst from Barclays estimated the sticker price mark-ups were in the neighborhood of $3.6 billion.
The executive director of insights at Edmunds, Jessica Caldwell, also confirmed the majority of consumers were paying above the MSRP and noted many consumers did so because they had no choice.
“The fact that an overwhelming majority of consumers are paying above sticker price would have been unthinkable even just a year ago,” said Caldwell “This is in part driven by affluent consumers being willing to shell out more cash to get the vehicles that they want, but there’s also a vast population of individuals who are being forced to do so simply because they need transportation and have no other choice.”
Caldwell went on to say other automakers are watching Ford and General Motors since the companies announced they would halt deliveries to car dealerships and could follow their lead if dealers continue to gouge consumers.